Retirement date

Q. I have a small email newsletter to mostly federal administrative law judges. Your recent article on Dec. 31 being the best day to retire drew the following alternate theory and we would love to hear your response:

“I have to disagree, especially in the case of high earning ALJs who presumably have some assets. Without taking the time to do a long-term analysis, I would suggest that it is better to carry forward the 240 hours of leave, enjoy the use or lose leave by Dec. 31, and continue working until March or April before retiring. You give up the extra pay for the vacation time you earned in the last year, but you get to take it as paid work time anyway — and you would have to pay tax on it in either event. By working until March or April in the new year, you can max out on your contributions to your tax deferred Thrift Savings Plan account by increasing your contributions to include your entire salary less the things that have to be taken out like retirement, health insurance, etc. This would permit you to add an additional year’s worth of deferred savings (an amount in excess of $20,000 including the catch up contribution) to your retirement funds. I think the trade off of putting away more than $20,000 tax deferred outweighs taking the cash for the use-or-lose leave, especially if you use the leave rather than losing it. I did that two years ago and still think it is a good strategy. I think the advice applies more to the average federal worker who does not have sufficient savings to draw on for a few months while he takes no salary in order to bulk up his TSP account.”

A. With rare exceptions, the employees who ask me when they should retire have two things in common. They want to retire as soon as possible and they want to maximize their lump-sum payment for unused annual leave, of which they have a lot. Clearly there are other factors that may come into play, which may make a date other than the end of a yearlook more appealing, either from a personal or financial point of view. While anything can serve as the basis for a retirement decision, the two that are the best guides are these: 1) Are you emotionally ready to retire? and 2) Are you financially able to do so? Don’t wrap yourself around an axle trying to figure out how to squeeze the last dime out of that decision. I’m reminded of something I heard said by a former staff director of the Manpower Subcommittee of the House Post Office and Civil Service Committee: “There are employees who went to their graves trying to maximize their high-3.” When you are ready, go. If you aren’t ready, don’t.